Correlation Between Amazon and Biogen

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Can any of the company-specific risk be diversified away by investing in both Amazon and Biogen at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Amazon and Biogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Biogen Inc, you can compare the effects of market volatilities on Amazon and Biogen and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Amazon with a short position of Biogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Biogen.

Diversification Opportunities for Amazon and Biogen

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Amazon and Biogen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc and Amazon is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Amazon Inc are associated (or correlated) with Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Amazon i.e., Amazon and Biogen go up and down completely randomly.

Pair Corralation between Amazon and Biogen

If you would invest  30,517  in Biogen Inc on September 1, 2022 and sell it today you would earn a total of  0.00  from holding Biogen Inc or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

Amazon Inc  vs.  Biogen Inc

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
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Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Biogen Inc 
Biogen Performance
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Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Biogen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amazon and Biogen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Biogen

The main advantage of trading using opposite Amazon and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Biogen can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Biogen will offset losses from the drop in Biogen's long position.
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The idea behind Amazon Inc and Biogen Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Biogen as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Biogen's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Biogen's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Biogen Inc.
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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